As part of the financial regulatory reform bill which has yet to pass the House and Senate, lawmakers put the future of the Home Value Code of Conduct (HVCC) in the hands of federal regulators to decide if the ban on reverse mortgage loan officers and mortgage brokers selecting appraisers should be continued.
Within 60 days after enactment of the bill, regulators are expected to issue interim final regulations defining with specificity, acts and practices that violate appraisal independence. The guidelines will establish a federal appraisal independence standard and replace the HVCC rule which is due to sunset on November 1, 2010.
Designed to provide a firewall in between the lenders and individual appraisers to ensure they are not able to influence home values, HVCC has had its share of critics. The changes have helped increase appraiser independence, but many say quality has suffered because appraisers are being paid less and are not familiar with locations they’re being asked to evaluate.
The bill could help to change that by requiring “reasonable and customary” fees be paid to appraisers to reflect what the appraiser would typically be paid for the assignment absent the involvement of an AMC according to the Appraisal Institute Group (AIG).
“This is extremely important for consumers and mortgage lenders,” said Leslie Sellers, President of the AIG. “With distressed sales prevalent in the market, it is critical that highly trained appraisers be actively involved in the mortgage market. In recent years, the inability to earn customary and reasonable fees has been a significant obstacle for many highly trained appraisers, whose experience is badly needed to assist with the economic recovery.”
AMC’s that we spoke with welcomed changes from the bill.
“Reasonable and customary fees paid to the appraiser is a great move for the long term success of the industry,” said Aman Makkar, CEO of AppraiserLoft, an AMC with a large presence in the reverse mortgage industry. “As long as there is a level playing field, appraisal management companies should compete on quality and service, not fees.”
Lawmakers have also requested that regulators make appraisals portable by allowing borrowers to use one appraisal when shopping loans to various lenders. The change could be made by regulators, but it does not specifically require it according to people familiar with the language in the bill.
The bill is expected to easily pass the House this week but the Senate is a whole dfferen’t story. With the death of Sen. Robert Byrd, (D-W.Va), it became unclear when the Senate will act, or whether Democrats still have enough support.